Charitable purpose

If you decide to apply to register as a charity, you will hear a lot about a legal concept called ‘charitable purpose’. This is a complex legal concept embedded in section 5(1) of the Charities Act 2005. It has evolved through 400 years of case law, since the Statute of Charitable Uses came into force in England in 1601. Judges’ decisions continue to shape the meaning of ‘charitable purpose’ in New Zealand.

Many organisations have worthy goals but Charities Services can only register an organisation when we are confident that it has exclusively charitable purposes and is for the public benefit.

The legal definition of ‘charitable purpose’ is quite different from what may be commonly understood by the public.

The charitable purposes set out in your rules or governing document, and the activities you intend to carry out, are extremely important to the registration process, and will always be assessed against the legal meaning of ‘charitable purpose’ in section 5(1) of the Charities Act 2005 and case law. It’s important you understand the categories of charitable purpose and what each of them mean.

The Charities Act 2005 says that ‘charitable purpose’ must fall under one or more categories:

This particular category requires that you firstly show an objective benefit to a sufficient section of the general public, and secondly that the purpose and benefit in question is charitable based on case law.

Activities

When assessing applications, Charities Services looks at the applicant’s current and proposed activities to determine whether the activities advance an exclusively charitable purpose. The Supreme Court recently confirmed that an organisation’s purposes may either be identified through its statement of objects, or inferred from the activities it undertakes. For this reason, Charities Services asks registration applicants to provide information about their activities.

Public benefit

A charity’s purpose and all its activities must provide benefits to the public or a sufficient section of the public, not just to an individual, organisation or closed group.

Ancillary or incidental objectives

A charity can have a non-charitable purpose—for example, running social events or running a business—as long as it is secondary or incidental to pursuing its main charitable purpose. In making a decision whether a non-charitable purpose is ancillary, we examine whether your non-charitable purposes and activities are necessary to carry out your charitable purpose, and how much of the non-charitable activity you are involved in. For example; a business may be registered as a charity if all its profits are directed to its charitable purposes and all the other registration requirements are met.

Political activities

Many not-for-profit organisations try to influence change by raising awareness of a societal issue or trying to change local or national laws. There is no general prohibition on political advocacy being a charitable purpose, but in a recent ruling the Supreme Court noted that it may be uncommon for political purposes to be charitable purposes. The Court noted that the advancement of causes will often be non-charitable as it is not possible to say whether the views promoted, and the means by which they are promoted, are of benefit in a way that the law regards as charitable.

In assessing whether a political or advocacy purpose is a charitable purpose, Charities Services must assess the intended result of the view that is being advocated, the means of achieving that result, and the manner in which the result is achieved.

Even where a political purpose is not charitable, it may not be a barrier to registration, as long as it is merely ancillary to an established charitable purpose. You can find more information on the Advocacy for causes page.

Some particular types of organisations

Marae

A marae has a charitable purpose if:

the physical structure of the marae is on Māori reservation land

the funds of the marae are used only for administering and maintaining the land and the marae’s physical structure, or for other charitable purposes

it advances benefits for the public.

Sporting clubs and groups

Sporting organisations can qualify for registration as charities if the promotion of sport is the means by which a charitable purpose is pursued - for example the ‘advancement of education’ or ‘promotion of health’. They must also advance benefits for a significant section of the public, not primarily for an elite few sports people.

Not charitable - examples

Examples where applicants would not be registered.

1

A commercial orchard wanted to donate half their profits to a local children’s hospital and give the other half to private shareholders.

They would have to donate 100% of their profits or keep the remaining profit within the organisation for future charitable work.

2

A group that is set up to lobby for peace by ending all wars.

Not charitable because the group cannot establish a public benefit in “ending all wars”.

3

A school class want to set up a fund to help their classmate get cancer treatment in America.

They would have to help a substantial number of people, not just their classmate.

4

A professional sporting body wants to set up a fund to help it compete at the Olympics.

A professional sporting body is not charitable.

TIP: You can see Decisions explaining why particular applicants have been declined registration. Reading the decisions can help you understand how your purposes must be charitable and provide for the public benefit.